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tv   Bloomberg West  Bloomberg  September 30, 2014 6:00pm-7:01pm EDT

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>> live from pier three in san francisco, welcome to bloomberg "west" where we cover innovation, technology in the future of business. i am cory johnson. pressure, ebay makes the decision to spin off paypal. is this a good move? speak to members of the original paypal mafia.
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and marissa mayer opens up to me plans for the company. first, netflix concord original tv shows. now it is trying to make its own movies. but the cost of making a movie is big. the question is will this pay off in profits? but to our lead, just months after saying a full separation of ebay and paypal was a bad they are changing their tune. carl icahn and others urged the split. ebay's marketplace president will become the new ceo of ebay.
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american express executive dan shulman is ceo designate of the new paypal company. is this a good idea? my partner, emily chang, has been posing that very question to the original founders of the paypal mafia. let's see what they had to say. >> no matter what happens, whether they spin it out or keep it in, there has to be a very firm agreement between ebay and paypal. that is true. could paypal grow faster if it were not within ebay? maybe, maybe not. would it be valued differently by the market? would it have a better multiple? all of that stuff? i don't really care. having said that, i think about were spun off, you could motivate the management team to do more direct. they would be compensated. the on paypal's performance. balance, i would say spinning
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it out is not a terrible idea. paypal be spun off from ebay? >> i think there are very large synergies. maybe it is something they should consider in the future. i think ebay was right to resist carl icahn. we do not want them to be dictating what silicon valley does. >> who should be ceo? it is critical to have someone with a product sense and not running as a operating business. >> someone from the paypal mafia ? >> i do not want to name names. obviously there are people there who would be good. >> you were instrumental in the sale of paypal in 2002. looking back, was it the right decision? ebay and paypal have had an interesting year. some other members of the paypal mafia think they are better off apart. >> it was the right decision at the time. we made it collaboratively. part of the reason was to get to the right level of the payment transaction system, it required a much closer transaction with
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-- connection with ebay. there is a much closer synergy. the funding is a lot of profits that come from people who are ready have balances. -- already have alan says. you can say is a better inside or outside? it is a question of what is the management team and what can you build towards? >> i don't sarin -- i don't think that anyway in the long term the companies stay together. i think fundamentally last year the economics, there is a reason why paypal has missed every window. the stripes and squares, every level of innovation over the past decade they have missed. they will continue to miss as long as it is is a pay subsidiary of the ebay in san jose. if you hold a leadership team, 90% believe in spinning it off. >> to me it is not a question of if but when. if the trend lines keep going
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the way they go, it will be at single percentage of paypal value. i think it is a 100 billion dollar financial services powerhouse. >> earlier emily chang and i a paypal legend on the phone. a paypal senior executive. we started by asking about the incredible reversal on paypal. >> i am not sure it is incredible. from the clips you just laid, -- played, most of us believe in one form or another a general feeling to get paypal its own wings in the management team direct correlated compensation to the performance. i am glad john is the one calling the shots. that preserves their relationship with ebay. david is worried about single digit percentage volume.
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that rings true. losing that incredible volume would be a bad thing. i think on the incredible news it seems great that john is willing to pull the trigger. remains to be seen whether the management team around the new paypal will be able to realize the full potential but very hopeful it well. >> what do you think of the american express executive now in charge? i know i have spoken to many of you guys over the last few months. some of you wanted a former paypal mafia member to be ceo and indeed that is not the case now. >> well, i do not know him at all. i have seen as bio but have no working past with him selling -- with him, so i the least am likely person to comment. he checks all the boxed in terms
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having been inside. it is his opportunity to lose. a romanticit was notion to see one of our own at the helm. >> i think it was inevitable. >> i think it was inevitable this was going to happen. as you might know we predicted when we sold a company paypal will be larger than ebay. there were only two executives at ebay at the time who believed that. almost certainly paypal will trade at a higher market cap than ebay. >> also in terms the technology developments, which you have been critical of, what has paypal missed and what risk does a separate paypal have now been might not have been edited when people were looking at the whole package earlier?
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>> paypal has missed the last decade in the united states. >> the growth has been fantastic. they have been very processable -- profitable. >> there has been a lot of international growth and have been very successful outside the united states. the united states there has been an incredible innovation in payments over the past decade and paypal has not participated in any of it. bitcoin and the derivative consequences. paypal has been relevant. -- has been completely irrelevant in all of those conversations. basically the past decade it has been a big black hole. the product is worse in the united states that was 10 years ago. >> how do you respond to that? has paypal missed that much innovation over the last decade? >> i think in part it is sitting on top of an automatically growing revenue stream based. -- revenue stream user base. quarter you are seeing 15% growth in the worse
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times. that is understandable if not forgivable. the flipside of paypal, it was founded over a decade ago and there are still a lot of the same code base that is powering transactions underneath. it becomes more and more scary to rewrite. they will still be under the quarterly magnifying glass of the public investor. i think it is inevitable that the management team will take relatively aggressive steps towards making it more flexible and offering new products and services. in this opportunity and small business lending. people or companies that see cash flow and transactional volume of a small business inevitably get into the cash flow management. it is an enormous opportunity. >> donahoe has told me he personally came to you and other members of the paypal map the or -- mafia for advice for what he should do. what can you tell us about what kind of conversations happened
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behind the scenes between you and other members of the paypal mafia and ebay? >> i think he probably in part thinks it is private. i am trying to remember exactly what i told him. to some extent the current management team within paypal, all of us are in agreement that it has a tremendous amount of potential skill, there are massive payments lending and consumer services. -- potential still, there are just massive inefficiencies in payments, lending, consumer services. i am not too worried about paypal being in the same state. just such a big market. >> we will have more on what this means to the future of both companies when we return.
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>> i'm cory johnson and this is bloomberg west. with paypal separating from ebay, the future of both companies is a little unclear. earlier, we spoke with a former paypal executive who is now an independent investor, and the former paypal chief executive operating officer. we asked what role the new executive will play in the new ebay? >> i think it is trying to differentiate ebay and the way they have gone from negative to positive over the last couple of years. still kind of perceived as a secondary market, not just for new things, but for things that are slightly
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off-season. i think they need to energize the brand. as we were talking about earlier, anybody under 30 does not really go to ebay. they have a marketing problem that they need to address. >> joining us now is the former coo of ebay. what do you think now that it is official that ebay will spin off paypal next year? keith havenot let all the fun. i was really pleasantly surprised at the definitiveness of this announcement. on your show about how i thought the spin out was a mathematical inevitability, that is the percentage of payments on
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paypal -- as the ebay volume went down that the spin out would make more and more sense. ebay a ton of credit for being ahead of the curve with this decision now. >> 40 think happened behind the scenes? this is a big reversal. we had the ceo in our office talking about why he decided not to do this not too long ago. the board looked thisis they probably felt was a matter of when not if. once you come to that conclusion, it makes sense to act decisively.
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i really applaud their decision. i think it is a very selfless move by john donahoe. i will give him credit for that. >> keith, i will give you the last word here. paypal as anr independent company that is not a partner with paypal -- with amazon, for example. pace of innovation in the last three or four years has been incredible and technology is behind the curve on that. trying to catch up on cultural , there are a lot of changes and transformations that would have to sort of be structural. >> that was the senior research analyst at piper jaffray, former paypal president and ceo david sacks. oracle's new chief operating saying says they have a
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at oracle that the silver medal is the first loser. we will chat with her and ask what she thinks about the acquisition strategy when we return.
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>> you are watching bloomberg west. i am cory johnson in for emily chang. there is a new ceo at oracle. , shee accepting the role aggressively did over 100 deals including peoplesoft and microsoft systems. i sat down with safra katz today. brett, let's talk. i had a really interesting talk with her. i thought i would tell her -- tell you some of the things she told me and you can tell me what it means. a lot of the conversation we had is on bloomberg.com. one of the things she said was they are taking a big shot at sap and their acquisition of concur. she said when they got the job -- when she got the job as ceo,
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she got all these congratulations from her friends . her father said i am so proud of you. she got in her car that night and said you know what? the biggest thing that happened sap blowing most of their cash on concur. what next? dairy queen? >> i think that was a big deal that involved more than travel and expense. i think this is jealousy in a sense because sap has put --ether a portfolio >> they say it is just a module. just to be clear, they are powering 50% of the online corporate market in the united states. i can tell you a lot of swiss firms that use that product. this is more than just a little module.
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was one of the largest deals ever. >> it was bonkers. it was like 200 times -- >> absolutely, but it was one of the most profitable parts of the public market. >> in the land of the blind the wise man is king. so, you like the deal? >> i like the deal a lot. we are big fans of the management. we are big fans of the platform. we use the product in many jobs. what sap is pulling together -- he has a very thoughtful approach, what he did on the hr side. fill glass on the talent side, and then on concur. --needed to make those club
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cloud targets and if you look at oracle, they are most efficient in applications. >> number one in database. in middleware where. number two in applications. said at oracle we look at silver medals as the first loser. been in trouble since they got in the business. >> they have essentially their hr apps, peoplesoft. they have the cr apps. there have been a lot of other acquisitions which you could name better than i. >> they have numerous acquisitions. to be a they are going lot more inquisitive in building out vertical. if you look at their up session with health care, they will talk
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that in. they have done a very good job in retail. you will see more acquisitions on the east coast. we think that would make a potential strategic great combination at some point. it's a great asset. it, theythink about are the most efficient in applications. quite she said we don't have to pay anything. we have a history of overpaying. cheaper.re a lot they do great deals that typically they can get value quickly. historically, they have not overpaid. they do big deals but they don't overpay for those deals. i was a huge critic of son. i thought they overpaid. but they have executed. everybody is asking what are they going to buy next?
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hardware, networking, applications, multiple categories. >> great stuff. really appreciate your fact checking. more bloomberg west right after this. ♪
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>> you are watching bloomberg west where we focus on innovation, technology and the future of business. i am emily chang. with ebay getting into investor pressure and spinning off paypal, will yahoo! be the next tech company to break up? an activist fund is pressuring marissa mayer and urging her to merge with aol. for more i am joined by the senior research analyst gene munster. what do you make of this pressure? our yahoo! and aol better off together? >> i do not think they are better off together. i would get the analogy they are to fading giants. i do not know that putting them
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together makes sense. i would say score another win for shareholder activists. has withhat apple their dividends or ebay and paypal. betterem to be getting momentum and making things happen. if you had asked me last week the probability it happens, i would say lower than it is today. that said, i do not think it is the right thing for yahoo!. >> what about softbank buying yahoo!? >> that makes a lot of sense. i think there are important tax implications if they go that route. the last tranche was almost a 40% tax rate. that could almost dramatically lower that. i think a combination around that does make sense. i think former aol and yahoo!, while they are synergies, it does not solve the fundamental
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questions about where does yahoo! fit into the internet over the past decade? >> the pressure has not seem to have stopped at all. we have seen up -- ebay caving to the same kind of pressure. can yahoo! stand up to this? >> i don't know. i think they probably have. marissa probably has another couple of quarters to show some sort of life in the business. the core focus has been around alibaba. but she is going to have to be held to a higher standard around that. so i think if something does not happen in terms of improvement in underlying growth, shareholder activists will get louder and could cause some sort of change six or 12 months down the road. >> they just made a lot of money, what can they do with that? can they use that to help the situation? >> they definitely could. they said they will get more than half of it back to investors. if you look at acquisitions in the low single billion dollars, which may seem like a lot of money but today's term the acquisition does not give a lot.
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we think they take something along the range of content. they have a good high-end salesforce. if they are able to get some next-generation content whether , it is around gaming or on demand. something along that they can leverage existing salesforce, we think that may be of benefit. >> what about tumbler? -- tumblr? how well do you think they have leveraged it since they bought it? has it become a core part of the business? >> it is a little bit early to tell. they think there is a big opportunity there. i would say success on a scale of one to 10 has probably been a six. it is still early to tell. that would be an example where they would say give us time or six more months to make something happen. that is a good example of having unique content in different ways to monetize it. we just have not seen the monetization yet. a they bought tumbler for
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billion dollars. thank you for joining us on yahoo! and paypal. house of cards has been a huge hit for netflix. last night we caught up with kevin spacey himself. hear what frank underwood told us about what -- about other netflix projects coming up. ♪
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>> kevin spacey have paved the way for hollywood stars to take on projects from streaming services like netflix. the start of house up heart was -- the star of "house of cards" was at a gala event in washington last night for the kevin spacey foundation which supports young artists of film and other performing arts. besides belting out some tunes, he also took time to talk to us about the importance of the art. >> i am delighted to be able to do something. the government always has this argument every year. these kids and teachers, across the country to make an argument
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for why arts and cultures are an important thing and why the government should and -- support arts and culture and now we are just darting to see these wonderful things around the country where colleges are looking at stem education. but they are starting to add an a in a lot of states. it becomes steam and the a is for arts. in an extraordinarily important thing to continue to try to encourage. >> also in attendance last night, the chief content officer, the man who helped bring house of cards to the streaming service. bloomberg television asked what other original projects netflix has in the works. >> starting in december as marco polo. we just recently launched the original adult animated comedy. just today we announced we will launch the first original film, crouching tiger hidden dragon
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two. it will premiere on netflix theaters around the world the same day. >> getting into the original movies with the sequel to crouching tiger hidden dragon -- to be released next summer. how big could this be for the netflix business? joining us as an analyst from new york. how big of the business is that? -- how big of a deal is this? is hollywood now on board? >> i think it is a major development. this is something netflix has been talking about for a while. this could market a major move as netflix looks to make its move to original programming. in terms of the impact on the overall industry, the window has been shrinking for quite a while. we think it could the the
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catalyst that facilitates further shrinkage to make the films available to consumers closer or even the day for when they run in the theater through other streaming platforms. >> we spoke to michael proctor who does not think it is such a big deal. he thinks it limited release. and will be very grimaced at to -- and he thinks hollywood will be very resistant to working with netflix in the future. how do you respond to that? >> i do believe they will have a major push back to strategy. i do think netflix was able to secure the weinstein partner. even a fairly high-profile property really speaks volumes as to how determined they are to disrupt the traditional film window much like they have done in television. while we do not expect the major studios to embrace this right away, you are likely to see more implementation.
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-- more experimentation in terms of being more selective on the rollout, perhaps being limited to certain types of film or even slower times of the movie caliber. -- calendar. >> what is the likelihood of the academy award of the netflix future? >> i think it is. i think the quick progress they have made on the television side, more importantly i think they are likely to get the company slack, as long as they are disciplined in terms of commitment. we have seen they have a massive combat and record. -- and axle lent -- an excellent batting record. film can be extremely volatile. i think to the extent they are disciplined they will be able to get investors to be at least the patient. >> netflix partnering with imax. why not a more traditional theater?
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>> in this particular case, i think. only will this lead itself ash lend itself to traditional stream like imax but for them, a way to get around the resistance from some of the major theaters. those theaters, we do not expect to play this title. i think what i must bring to the table is a relatively limited number of outlets that can showcase the potential for a title wake this to be streams with the release. i think the take away here is the beginning of a new paradigm that can shake of the industry for a long term. >> what is the likelihood netflix can be as successful as it has been with " house of cards" and "orange is the new black"?
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>> that is right, but they're batting record has been excellent so far. they have talked about ramping it up to 10% of the total programming spent. they have gotten more creative with their original programming. we think there a few years out from that target. ultimately, i think, as you said, you are as good as your last release. we think there are kind of a role in expect them to ramp up, -- they are on kind of a role, and we expect them to ramp up from here. >> thank you so much. other stories making headlines with mark crumpton. >> microsoft showing a preview of its newest windows operating system, windows 10. the new software brings back the new start menu and will allow corporations to tailor the app store for own users. it has also added security features designed to bring back enterprise customers after the consumer focused windows eight. the federal communications commission has voted to do away with the sports blackout rule, dealing another blow to the national football league.
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the 40-year-old rule allows them to keep off games in local -- to keep games off television in local markets where the stadiums did not allow. -- did not sell out. the nfl could still enforce blackouts through contracts with individual contract nurse -- contractors. move is the owner of realtor.com and moving.com. adding the websites will about -- allow news corp. expand into real estate this things at its best listings as ad revenue at its newspapers struggles. >> thank you so much for that update. trying to disrupt the way people consume news. why the service is gaining traction when we return. ♪
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>> welcome back to bloomberg west. i am emily chain -- chang. since first watching in 2012, circa has tried to change the way people get and consume news on mobile devices. recently updating with a new service called wire, which provides an update of the biggest news and updates two stories news or -- users have subscribed to. joining us to talk about the future is the circa ceo and cofounder, matt gallagher. what if the update and why should they use this? >> the update is pretty massive. the beginning is often all about -- the beginning has been all about making sure people are able to get assisting piece of news during the day. we write the stories that are just the facts. we have this really fantastic feature that allows people to follow the story they care about and continually get up dates as the stories evolve. anything from ebola two o presidential races to
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anything people might evolve from. why are -- wire allows people to get the updates in a much more cohesive way. an old video we had. but the idea was we really want them to be able to get in, get everything they need in a few moments. get caught up in the day and have some sense of completion. only up dates for the stories and a handful of things that our editors think are the most important things for the day. >> people are getting results from twitter, facebook. some people actually pick up a magazine at the airport. what makes you think a newsreader can dominate? >> there are a couple of reasons. all of those places you are getting pieces, 500 word pieces. we have changed from the time when we were reading news with coffee at the table and taking
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40 minutes to the time it takes for us to stand in line and get coffee. or those very couple few minutes, we want to read it much quicker. would make it constantly mobile lives. the idea we have to keep up with stories on our own. and tomorrow there is a -- if i read a news story today and tomorrow there is some sort of evolution i am rereading what , i read yesterday just to get caught up. the whole follow feature is based on that. all about efficiency. >> your president now joining us in new york. former head of tumblr, bought by yahoo!. what are you bringing to circa? -- from tumbler to circa? what did you learn there that you are applying in the new experience? >> there were many learnings. i spent almost five years at tumblr. we raised five years of funding.
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-- five rounds of funding. we kept the team very small over the course of the time and focused intensely on products, much like a small team. as the network emerged, we learned a lot of stuff and had to scale it into significant network. >> i will ask you the same thing, which is what do you see in circa compared to other newsreaders out there from twitter to facebook to google news, linkedin and influencers? why should people use circa? >> full disclosure, i was one of the early angel investors in circa. i have been closely paying attention every day. when i jumped and i jumped in about four months ago. they really have done transformative work in form -- in terms of creating news
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consumption in a mobile lifestyle and pioneering future in following the story feature. >> how do you see habits changing? how will my news reading habits change in how i want to consume? >> it is really difficult right now to be able to keep up with the barrage of news. it is completely filled with nukes -- with news from every angle. funny cat pictures to very important step. -- stuff. i think as this commoditization of news continues, and people will try to find sources that will help them dies in on specific things they about, whether it is a source like the board which may give a broad sense of the topics they may be interested in were a source like circa which is focused on making sure people are getting the breath of knowledge in the world.
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i love " the economist" the inspiration for circa. the two pages this week in the world. before we started that i used to read religiously. the idea i would get caught up quickly. i think as people lead normal -- mobile lives, you will see a continuation of getting focused on what it is they care about. >> how do you make money? >> we have a bunch of things we will be starting soon. advertising is one area. also something that can follow stories. the idea with a story about -- the idea that we could come in with a story about working with marvel and disney and in the avengers story that continues to evolve over time. all of the things that might happen afterwards. sponsored stories are a big one we're interested in. another piece is bringing our unique ability to create news. we have an entire back and people do not see that is really
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unique and makes us incredibly efficient with only 10 writers and we want to bring that to other newsroom to see how we may make those newsrooms more mobile. >> you mentioned multiple rounds of funding. $800 million at -- and valuation. is circa an acquisition target? >> there is certainly a lot of interest in circa. i came in and raise capital. now i am out raising a significant round of capital. gives the opportunity to really turn this into a significant scale. >> do you want to sell? >> do i want to sell? >> my last two companies were both acquired. the reality is this is a real problem, getting caught up with news. informing the world. i am really intrigued by the problem and want to keep working on it. >> john maloney, thank you to
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both of you. we will keep our eye on you guys. speaking of stories being shared around the world, tens of thousands of protesters are blocking the streets in hong kong in a fifth day of protest throughout the city. activists calling it the umbrella revolution after using umbrellas to shield themselves from tear gas used by police. as china block social media sites in china, how are the protesters sharing their message and organizing rallies? what is the very latest date on the technological situation there and how protesters are sharing information? >> protesters are still on the street demonstrating peacefully well into the night. smartphones are engaging with online communities. they spoke and twitter have changed profiling to be that of a yellow ribbon. this is the pro-democracy goals. they're asking friends to send photographs.
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i received hundreds of photographs. some from local to documenting history. how they are bringing food, water and deodorant so they do not have to go home and shower. this is a place close to hong kong central business district. essentially the umbrella revolution campaign has launched on facebook. launched as a campaign to spread the word about universities where students cherish values and long with hong kong. october 1 is the actual day when many people will wear yellow to support what is happening more broadly. >> i know you will keep this up dated on what is going on there throughout the day. thank you so much. thank you for watching this edition of bloomberg "west." we will see later. ♪
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>> welcome to "money clip," where we tie together the best stories, videos, and interviews in business news. i am adam johnson. it turns out it is easy to keep investors smiling. we talk about ebay's split from paypal. and recalls -- we dig into that one. hong kong city leaders say, just go home please. the ceo of dunkin' brands says bring it on for chains trying to get in on his breakfast game. and in pop, it turns out that "house of cards" star sings.

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